Struck Hostess Brands to Liquidate

Source: FoodProcessing.com

By Food Processing Staff

Nov 16, 2012

Hostess Brands, the iconic 92-year-old baker of Twinkies, Wonder Bread and Donettes, said on Nov. 16 it would liquidate when unionized employees refused to return to work and face salary and benefit cuts.

The wind down means the closure of 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes and 570 bakery outlet stores throughout the U.S.

It also means the sale of many nationally popular brands, including Hostess, Drakes and Dolly Madison, which make iconic cake products such as Twinkies, CupCakes, Ding Dongs, Ho Ho’s, Sno Balls and Donettes, and bread brands Wonder, Nature’s Pride, Merita, Home Pride, Butternut and Beefsteak.

Hostess, in its second bankruptcy reorganization in eight years, back in September managed to get all unions for its 18,500 employees to accept concessions except its largest union, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM). The bankruptcy court imposed the concessions on that union, too, in October, but the BCTGM went on strike against the national baker beginning Nov. 9, and other unions reportedly honored the picket lines.

“Hostess Brands Inc. … is winding down operations and has filed a motion with the U.S. Bankruptcy Court seeking permission to close its business and sell its assets, including its iconic brands and facilities,” said a company statement. “Bakery operations have been suspended at all plants. Delivery of products will continue and Hostess Brands retail stores will remain open for several days in order to sell already-baked products.”

“Hostess Brands is unprofitable under its current cost structure, much of which is determined by union wages and pension costs,” the company statement continued. “The offer to the BCTGM included wage, benefit and work rule concessions but also gave Hostess Brands’ 12 unions a 25 percent ownership stake in the company, representation on its board of directors and $100 million in reorganized Hostess Brands’ debt.”

According to the BCTGM union – which also is one of Hostess’ biggest creditors -- the contract imposed on their members called for wage and benefit cuts that amount to 27-32 percent overall, with an 8 percent wage reduction imposed immediately. The company unilaterally ceased making contributions, required by their union contracts, to the workers' pensions in July 2011. Hostess has also cut health benefits.

The union also claimed that, instead of capital investment, product development and plant improvement, money was flowed to executive bonuses and payouts to the investment funds that owned much of Hostess Brands.